The R.I. Economic Development Corporation filed suit in R.I. Superior Court today against some of those involved in the deal that loaned 38 Studios $75 million in taxpayer money, reports WPRI (thanks VG247). This document offers the full complaint, and this video lays it out further. Here's a portion explaining that part of the problem was the developer not explaining clearly enough they were borrowing this money because they needed money, and another issue is an alleged conflict of interest:

The complaint says 38 Studios officials failed to disclose that the company was "undercapitalized by many millions of dollars" and therefore "was likely to run out of money in 2012." It also warns that EDC board members who approved the deal could be liable themselves if the legal discovery process uncovers evidence that they knew the risks and signed off on the $75 million loan guarantee anyway.

It quotes an email from an unnamed EDC loan analyst who told his bosses: "I don't think I can support a $75 million loan guarantee to any single company in this industry," referring to video games.

The EDC never ordered an independent assessment of whether 38 Studios would be able to finish the game after the board voted to approve the deal on July 26, 2010, even though board members were told the agency would do so, the complaint alleges.

It says Wells Fargo earned nearly $500,000 "in hidden commission from 38 Studios" that were not disclosed to the EDC board at the same time the bank was also supposed to be looking out for the agency's interests.

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Considering the amount of athletes who are rich and impressionable, the number of sketchy investment scheme salesmen, and the state of not only the general economy (bring us jobs!) but the risky video game entertainment business, none of this comes as a surprise. I've seen far worse plans and execution, but when you toss in government dollars you need to expect either oversight (which is always inefficient) or legal recourse (if expectations are not financially met).

The irony of this is, of course, that contractors for the government NEVER come in at their quoted cost, or often even close, but this goes both ways as the government usually slashes the number of units or features or something else to curtail the program. Now, knowing this and being aware of the circumstances I mentioned above, who in their right mind couldn't foresee a MMO becoming a regular RPG while also costing more money than expected?

These are two entities (video game industry + government) that should never work together, outside of the educational and tax benefits seen in places like Canada and Europe (and to some extent, Texas and parts of Asia). The only successful cohesion of another nature had oversight (America's Army) and we all know what that was about, and it matches the expectations I had above when it comes to oversight.